What happened Tuesday

A review of things you need to know before you go home Tuesday; no rate changes, KiwiSaver comparatives, rent subsidies compared, HNA murkier, swaps firm, NZD stable

25th Jul 17, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today.

DEPOSIT RATE CHANGES
None to report here either.

KIWISAVER COMPARATIVES UPDATED
For readers who use our KiwiSaver analysis - unique because it is on a member-centric regular savings basis, rather than the usual industry-centric point-to-point basis - you should note that all the data is now updated to the latest June 2017 results. Our coverage is comprehensive, covering 156 individual funds. We will have a set of reviews later on each risk category.

NO DEBT STRESS
We have been tracking personal and SME bankruptcies for 14 straight years now and the current levels of bankruptcies, no-asset-procedures, and small company liquidations are at near historic low levels. On a per-capita basis, they are at record lows. This canary is alive and well (dispelling some urban myths and economy trash-talk).

COMPARING RENT SUBSIDIES
Australia's equivalent of our Accommodation Supplement is the Commonwealth Rent Assistance program. Like our's, it is facing increased claims. A new Report out today shows that 1 mln Aussies will be on it this year or early next, and 1.5 mln by 2031. (The average current subsidy is AU$55.80 per week. You can work out the amount of the NZ subsidy available here. It will be rising from April 2018.) The Aussie program costs taxpayers about AU$ 3 bln per year. The NZ program costs NZ$ 1.2 bln per year for about 300,000 renters, and average of about NZ$77 per week.

HNA STRUCTURE AS TRANSPARENT AS BEIJING SMOG
In China, HNA had promised to clarify who owns them today. But that filing just got even more murky, because of some pre-release changes that added some new US foundations as owners. All this is underscrutiny the more HNA tries to do business in the US, and the more a Chinese fugitive releases murky details from his exile in a New York skyscraper (to Beijing's fury). HNA's approval to buy UDC is still pending New Zealand regulatory approval (the OIO and RBNZ).

A HOUSING CRISIS MIRROR
The 'housing crisis' is similar everywhere, it seems (except perhaps in American rust-belt towns).

WHOLESALE RATES FIRM
Wholesale swap rates are marginally higher today. Across the board, they are up +1 bp. Except the 90 day bank bill rate is holding at the lower 1.93% level.

NZ DOLLAR STABLE
The Kiwi dollar is down just a little at 74.3 USc. On the cross rates we are stable at 93.8 AUc and at 63.8 euro cents. The TWI-5 is still at 77.2. Bitcoin is little changed as well at US$2,777, almost the same level as yesterday.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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4 Comments

by dictator | 25th Jul 17, 4:19pm 1500956352

The only companies I know of that have gone under or are otherwise bankrupt in the past year have just been edged out by competition. I'm not seeing any projects that are causing a cascade failure or similar, commercial work is strong at the moment.

by unaha-closp | 25th Jul 17, 5:11pm 1500959488

The 'housing crisis' is similar everywhere, it seems (except perhaps...

...Banff is building 130 new housing units)

Which would be the equivalent of Auckland having 24,500 new housing units in production. Auckland is so screwed.

by Stephen Hulme | 25th Jul 17, 5:39pm 1500961165

Part of “reflation” was always going to be banks making more money in money. These days that is called FICC – Fixed Income, Currency, Commodities. There’s a bunch of activities included in that mix, but it’s mostly derivative trading books forming the backbone of math-as-money money. The better the revenue conditions in FICC, the more likely banks are going to want to do more of it, perhaps to the point of reversing what is just one quarter shy of a decade-long decay.

Having been stung almost universally by the “rising dollar” (conventional wisdom always says, or said, banks only make money in this space when volatility is higher; like many other money clichés, it has been proven false quarter after quarter), there was for many an expectation that “reflation” would even if temporarily turn things around. In FICC, Q2 2017 wasn’t very good at all.

Leading the way to the downside was Goldman Sachs. Revenue in money dealing tumbled an alarming 40% year-over-year, following Q1 that wasn’t all that good to begin with. At just $1.16 billion, that’s down from $2 billion in Q4 2016 at the peak of the minor “reflation” frenzy, and the worst since the heaviest (volatility) of the “rising dollar” in Q4 2015 ($1.12 billion).

If I had to guess, Goldman was likely stung being caught not expecting the depth and persistence of anti-“reflation.” As a card carrying member of “interest rates have nowhere to go but up”, the bank very well might have been positioned for all that “rising rates” should mean in the textbook sense. The textbook hasn’t been correct for a very long time, which is one big reason why these parts of the monetary system just can’t get out of their own way. Read more

by Leverageup | 25th Jul 17, 5:53pm 1500962003

Translation: Banks trading books havent been well positioned on the recent bond market recovery. So what? FICC teams in this part of the world havent been doing so bad.